Banks Expect Larger Fourth Quarter Loan Losses

Three banks making presentations at an investment conference in New York today warned that fourth quarter loan losses would exceed earlier expectations.

Wachovia Corp., the nation’s second largest bank, is doubling its expected loan-loss provision for the fourth quarter to $1 billion from previous estimates of $500 to $600 million.

“We wanted you to know where we are as we sit here today,” Wachovia’s CEO and President G. Kennedy Thompson said during his presentation at the Goldman Sachs conference.

Thompson added that the updated estimate “will position us better as we enter 2008.”

Bank of America, the nation’s second largest bank, expects fourth quarter writedowns of CDOs to exceed their earlier estimate of $3 billion.

“Based on conditions today, we expect those writedowns will be larger than have already been reported – although obviously we won’t know our final numbers until we close the fourth quarter,” Bank of America’s chief executive Ken Lewis said. “We will discuss those numbers on the January earnings call.”

In November, the bank and mortgage lender said it expected fourth quarter loan-loss provisions to rise to $3.3 billion, a $1.3 billion increase from earlier estimates.

“We expect weak fourth and first quarters, but at this point we are not forecasting a recession,” Lewis added. “I think you certainly can assume results will again be quite disappointing.”

A Merrill Lynch analyst cut Wachovia to “sell” and Bank of America to “hold”.

Additionally, PNC Financial Services Group Inc. said its adjusted credit loss provision for the fourth quarter will be $110 million, up from $45 million in the previous quarter.

The Pittsburgh-based bank also slashed fourth-quarter earnings estimates and expects a $1.5 billion writedown tied to the value of its commercial mortgage loan portfolio.

Shares of Bank of America fell $1.50, or 3.36%, to $43.15, Wachovia slipped $1.51, or 3.60%, to $40.44, and PNC lost $2.50, or 3.53%, to $68.26 in early afternoon trading on Wall Street.